Recent changes in the Home Building Act 1989 (NSW).

A major recent development in Construction Law was the passing of the Home Building Amendment Act 2014 (NSW) which received assent on 5 June 2014. As at the date of this Publication, it has not yet commenced and will commence on a date to be appointed by proclamation. This Amendment Act introduces some substantial changes to sections of the Home Building Act 1989 (NSW). This Amendment Act contains a number of significant reforms that will benefit builders as well as additional obligations of which builders, principals and other building professionals need to be aware.

Interestingly, some of the provisions have retrospective application; however, they will only apply to proceedings brought and insurance claims made after the commencement of the amendments with proceedings commenced and insurance claims made prior to be excepted. We summarise below some of the key reforms introduced by this Amendment Act:

Nine Key Reforms

Firstly, the implied warranty for building work to be performed ‘in a proper and workmanlike manner’ has been amended and replaced with the warranty that the work be ‘done with due care and skill’. Whether this imposes a higher or lower standard of care will be an area of legal contention.

Secondly, a major change has been made to proceedings for breach of warranties. Warranties covered by a six (6) year warranty period will change with a shift from a “structural defect” to a warranty for a “major defect” in a “major element”, which in lay terms is basically a severe defect. As a result, it is expected that a greater number of defects that were previously covered by six (6) year warranty periods will now only be covered for a period of two (2) years. However, severe defects in waterproofing and fire-safety systems will now be covered by a six (6) year warranty period. This change will have retrospective effect unless proceedings have been commenced, or a home warranty insurance claim has been made.

Thirdly, subcontractors will be liable for the same statutory warranties as builders, with those warranties also implied into subcontractors’ contracts. This change will have effect for new contracts after the amendments are proclaimed.

Fourthly, builders will not be liable where a building defect is due to an owner’s consultant’s defective designs or specifications where the owner’s consultant is independent of the builder as set out in the amended legislation. This change will have effect for new contracts after the amendments are proclaimed.

Also, the maximum deposit payable by an owner will increase from 5% to 10% for residential building contracts over $20,000. This change will apply to all new contracts entered into after the amendments are proclaimed.

Furthermore, owners must notify builders and subcontractors of a building defect within six (6) months. Any delay that results in rectification costs being increased may cause a Court or Tribunal to award a reduced amount. This change will apply to all new contracts entered into after the amendments are proclaimed.

In addition, owners must not unreasonably refuse access to a builder to rectify a building defect. This requirement will apply to all new contracts after the amendments are proclaimed.

Also, rectification will be the preferred outcome in a building dispute claim and a tribunal or court will have a standing directive to make a rectification order over an order for compensation where reasonable. This change will have effect for any proceedings that are commenced after the amending legislation is proclaimed.

The cooling-off period where a person may rescind a contract for residential building work within 5 days without penalty will not apply where all contracting parties hold contractor licences, where contracts are between a builder and a developer and where contracts are wholly supplied and fully prepared by or on behalf of the person who is contracting with the builder.

If you are involved in building industry, such as if you are a builder, contractor, consultant, principal or any party in the construction industry, it is important to obtain legal advice and assistance if you believe you may be affected by these changes. Navado Lawyers & Solicitors has the expertise to assist you with your building law matter. To discuss your legal matter with a Sydney Building and Construction Lawyer, please contact Navado Lawyers Sydney by phone on (02) 9233 4048 or email us at info@navado.com.au. This article was published by Sandra Mezher, Sydney Building and Construction Lawyer.